Did Limewire Shutdown Increase Music Sales?

from the digging-in dept

Last week, we had a post following the report from NPD suggesting that file sharing in the US had dropped off significantly due to the Limewire shutdown. While there are some serious questions about NPD's methodology, we assumed that it was at least mostly accurate, and then asked if there had been a corresponding increase in music sales. After all, despite what you hear from the RIAA/MPAA, the end game should be about business being stronger, not about "reducing piracy." And if "reducing piracy" doesn't end up with more sales, then what good does it do, really?

I think this is worth exploring, because I've been asking for some actual empirical evidence and we have some. If it's really true that reducing piracy leads to greater sales, that would surprise me, but it would be good to know. If it turns out that reducing piracy leads to more revenue than could have been made otherwise (such as by embracing file sharing) then that would likely cause me to change my opinion on the best strategy for the RIAA to take in this fight. As for the Taylor Swift example, I don't think that proves much of anything, frankly. Throughout the file sharing era, there have been a bunch of releases that sold over a million copies in their first week. In fact, prior to Napster, there had been only two such releases. The rest all came post-Napster. So I'm not sure we can really learn too much about that. Big hit albums still sell. I'm not sure that's got anything to do with Limewire.

As for the other link to sales being up for a five week period, that's definitely worth noting, though, it does not correspond to the same quarter that the NPD study covered. NPD looked at Q4 of 2010. The link above is talking about February and March of 2011. Now, it's entirely possible there's a lag, and people who stopped using Limewire did nothing for 3 months and then suddenly started buying. Perhaps that's the case. If anyone has more info on what was actually selling during these past five weeks, that would help us dig a bit deeper into this information. Some might also point out that SoundScan is not the most trustworthy source of data on music sales -- but it wouldn't surprise me if it were accurate "enough" for the type of music that people used Limewire for, so I wouldn't write it off just because it's Soundscan.

I'm not yet convinced that these two data points are necessarily connected, but it is certainly worth noting the recent bump, and it would be great if folks here were able to dig in a bit deeper and see if we can unpack the reasons for the bump in music sales over the past few weeks.

Long Term Gain or Short Term?

I'm sure there are a some people who, after losing their Limewire, decided the easiest way to get their music in the short term was simply to buy it off iTunes/Amazon/etc, but the real question is, what happens when those same people discover the Pirate Bay or any other torrent site?

Now, you may ask "But who doesn't know about the Pirate Bay already in this day and age?", and I would counter "But who was still using Limewire in this day and age?"

Congrats on impeding the illicit music downloads of soccer moms everywhere; I'm sure things will turn around for the industry in a hurry if you can just crack down on illegal 8-track copying while you're at it.

Re: Boing

As soon as Limewire was shut down most people (like me and I do hate to admit that I used limewire) simply googled what happened to linewire and discovered in the first few pages "limewire pirate edition"

nope

Taylor Swift's album you were talking about, you say it sold well in its first week of availability. I infer from this her album was never available on Limewire. What's the connection exactly? She won a grammy or whatever last year, of course her album sells.
I can't speak for everyone, but if I've been getting my music and video for free for years, I wouldn't buy that stuff ever again. Even if the Internet was shut down because of file sharing, even if there was no possible way to get it for free anymore; I would not go back to wasting money on CD's that have 2 good songs and 13 stuffers. Or paying 20+$ on one movie that I really only want to see once. I would not spend a dime on the companies that destroyed the Internet.

Skeptical view

Alright, let's seriously think about this...

The Grammy's are still a very big part of American culture and they occurred on February 13th. I'm not sure of when a week happens, but if you are looking at a regular 5 day business week, it puts the time that Soundscan recorded the data at ~ Feb 9 of this year.

I can't look at Taylor Swift's data from Google or anything else so I'll have to just take the word of the article. That said, let's look at her competition:

I have a little experience with music, but just looking at the list, I'm sure that she didn't have strong competition. No Christina Aguilera, no Britney Spears, or anyone that was really dominant in female pop/country singing. Hell, even Jessica Simpson didn't release.

Rihanna is R&B, along with Eminem in Hip hop + Kanye possibly cannibalized sales (Kanye is probably still reeling from his bad experience with Taylor that have caused his numbers to go down and possibly increase Taylor's even more)

What I would need to find is digital sales since that data tells a bit more of the story.

It doesn't look like Soundscan admits data from Youtube revenue, Pandora, or anywhere other than iTunes which is rather limiting.

Did Taylor have a good week? Or was it more to do with little competition? I'm going with the latter.

Taylor Swift Speak Now

Taylor Swift had her album selling dirt cheap at Target during the first waves of sell due to a promotion deal she had with them (a deluxe version going for as low at $10) amazon was selling it under $9 too

People were still using Limewire?

I'm not really joking. I haven't heard anybody talk about using it in ages. I can see a certain tail of people not active in adopting new technologies, but that would've had to be a small portion of the pirate community. Wouldn't it?

Does it hurt?

Having to give credit to a pretty much "industry sponsored" report so as to sound one of the following:
ObjectiveBalancedFair I can appreciate what you're attempting, though.After all 30 Heifers Agree!

Re:

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Do you think you would have purchased music if limewire pirate edition didn't exist? I know if I didn't have easy access to music(aged 37) I wouldn't have even considered going to several live performances that I've recently attended and I definitely wouldn't have bought $1 Itunes songs. Music would have just faded into irrelevance and more Internet shit would have filled the void.

Re: Long Term Gain or Short Term?

Purely anecdotal, but fairly supportive of your point:

Good friends and a family member have enjoyed the shared music collections (some paid for and some not paid for music, some ripped from CDs, some unauthorized downloads, some from who the hell knows) of their respective adult offspring. All most definitely would never have paid for all those songs simply because the money to do so is not, never was, and never will be there. They won't be running out to buy the quantities of music they currently have in their possession, no how, no way.

I know one kid used Limewire, but when it shut down (which he found out from me 'cause I read it on TD), he just moved on to something else. Another is a techie sort and probably never used Limewire at all. I think he's primarily a sneakernet participant.

Their parents aren't thieves, they just enjoy music and their kids share what they have with them. Does it matter that they were given music that came from Limewire, et al versus CDs someone else owns?

Sales bump. Good for them. But it would be foolish to think that the tide has fully turned. It's still infinitely and easily reproduceable goods they're selling, and that center just cannot hold forever.

Recap: Album Sales over the past 5 weeks

With regard to your inquiry about Billboard Sales over the past five weeks, please see below.

In my opinion, I seriously doubt that there is any connection between the sales increase and any external factors relating to "piracy".

Over the past 5 weeks, there have been a number of highly anticipated albums released (Lupe, Adele, Bieber, Marsha (ex-Floetry). In addition, the major label cash cow "Now" series released yet another compilation-of songs most of us are sick of-that also helped contribute to the increase.

New releases always jump to the top of Billboard and then drop off, sometimes drastically. This likely accounts for any perceived "growth" within the retail music market.

Re: I appreciate

Yup, Donny, I have to agree. With data that is "out of what is expect", I applaud Mike and many of the posters here for taking a look at it.

It might also perhaps add a little more light into what happened when IPRED was turned on in Sweden. There too, when piracy was made a little more difficult, there was at least some indication of increased sales, at least for a while.

I draw no conclusions at all from any of this, the data goes against everything that has been pushed here for years and certainly requires more investigation.

Re:

Re: Re: I appreciate

In layman's terms, it's like measuring water coming out of a pipe without knowing if the pipe has holes or where the water is coming from. There's information, but it's fairly narrow and specific, and it does not say anything about the plumbing system at large.

Reading the comments here, it hits me I know absolutely none of these artists. Their names ring no bells at all.

Now I might have been curious if I was in a file sharing site to have looked. Without such exposure, it is a certain 100% no sale.

Like everyone else, I learned long ago you never, ever, buy music without checking it out first. There's just been too many ripoffs of the one good song album.

I've went from a regular buyer to a non-customer. I don't care for modern music, no longer hear new tunes, and have no exposure to new stuff that remotely interests me into buying. The whole business of this copyfight has been a real turn off and I can find entertainment elsewhere without having to deal with it or supporting those that are raising such a stink over it.

My opinion of the majors doesn't get high enough to reach the bottom of the ditch. I doubt after all these years of this going on I will ever buy music again.

Funny thing is, I know where to get it for free. I have so little interest in it, it's not worth the bandwidth to bother. I'd say the copywrong industry has been successful as to terminating piracy on my part. In the end, they still get zilch.

1. Since Limewire like all other networks have regions where it gets used more, that probably didn't affect sales in the U.S. or Europe at all.

2. The 3 months hiatus suggests that it has nothing to do with the enforcement actions taken.

3. The small nature of the increase at the moment suggests that is just a natural up cycle.

It would be interesting to assume that this type of negative incentive(punishment) was true and compare it against the positive incentives(reward) to see which ones increase the bottom line, would also be interesting to note what impact Limewire had in South America markets since that was their bread and butter market and I read in a report by the RIAA that those countries are piracy heavens but where amongst the growth markets registered.

I don't see why this is odd at all. I've never met a file-sharer that wasn't way into music. That's why they go to the trouble of downloading. Some limewire refugees went elsewhere and some went legit. Hardly surprising, imo.

Re: Re:

I actually prefer the randomness of the radio station... but as far as purchase goes, i only download to try something, if I like it, i go purchase it to support the creator. The game "F.E.A.R." comes to mind. I downloaded it, loved it, ran out and bought it.

Re: Boing

Haven't we seen this 'dead cat bounce' before? People pull back, reconsider their options, and plunge ahead again.

sure, but is there a certain amount of "breakage" with each bounce?

with each shutdown and the community around each service fragments, does a certain percentage of that services users stop downloading?

what i am interested in is this:

1)just what is that percentage? is it large or small compared to the size of the user-base for the service that was shutdown?

if 50% of napster's users "went legit", and with each subsequent shutdown, another 50% of the remaining users from each resulting service also stopped file sharing, then maybe enforcement has had some positive effect, though the law of diminishing returns will probably come into play at some point.

however, if the percentage of users who start buying is only 5%-10%, maybe enforcement just isn't worth it at all.

2) does that percentage continue to buy long term?

this is the dead cat bounce you mention. is there a brief spike in music sales while the fragmented community settles in elsewhere, or does each shutdown actually create long term buyers?

again, if this batch of converts is only temporary, then shutting down services like limewire only creates a temporary boost in sales, so the legal costs of these shutdowns should be measured against the increase in sales over the duration of the spike to determine if the increase in sales is a net gain.

if it's not a net gain, again, then why bother?

if a small percentage of users convert (question 1) but they convert for a long time (question 2), maybe costs of these enforcement measures will pay off in time.

3) what are the buying habits of these new converts? do they use services like iTunes, or buy CD's the old fashioned way? or do they flock to foreign pay services of dubious legality? are the people responding to these surveys even aware of the difference?

if shutting down a service drives sales to iTunes and other "industry approved" outlets, then it's probably worth it to keep enforcing. this of course is assuming that the percentage of conversions from question 1 is high enough and/or the duration of the conversion from question 2 is long enough to make the increase in revenue justify the cost of the legal action.

Re: Re: Re:

Same here. Still my favorite FPS. Oddly enough FPS needs a good story to get me. Halo is a good series I think for the story, but I find the gameplay to be sort of lame. F.E.A.R. though is great gameplay and an amazing story. Has the get in your head fear, not the Doom 3 something is going to jump at you fear. FEAR2 I found to be just as good. Extraction Point was okay but veered away from the main character, which is where my interest lays. I have good hopes for FEAR3.

Re: Re: Re:

I'd love to know what stations you listen to, because around here the radio definitely can't be called "random." Sometimes it feels like the play the same song at 3:40 for several days in a row, and most stations' music catalog is maybe a few dozen entries long.

Compared to my own personal collection, which I could literally listen to straight for over 2 weeks (over 330 hours running) and not hear the same song twice.

Re: Re: Boing

this is the dead cat bounce you mention. is there a brief spike in music sales while the fragmented community settles in elsewhere, or does each shutdown actually create long term buyers?

I'd think it unlikely. If there was more "carrot" maybe you might get the effect of "Oh, you know what? Now I come to try is again buying stuff is actually really easy and convenient - well worth the money.". The reality of "more stick" is that after a few months/years/whatever those people are more likely to start thinking "God this DRM stuff is awful, to play this music everywhere I want it I pretty much have to be a 'criminal' anyway so why am I paying for it again?"

Re: Taylor Swift Speak Now

That's an interesting metric that's often left out. "One million sold" makes for a nice big number to put in your headlines, but how does the profit stack up? If you're selling twice as many for 1/3rd the price, that's probably not a winning equation.

I've pointed this out before. That NPD study we are talking about shows a large decline in p2p traffic since 2007. So if we are trying to correlate the drop in p2p in Q4 2010 to an increase in sales shouldn't we also see an increase in sales since 2007? I mean to say p2p traffic dropped a few months ago and look sales are up this month they are related. That complete ignores the fact that p2p has dropped since 2007 and music sales have continued to decline in that time frame.

I do understand you trying to appease so ACs and make what they keep repeating in comments a actual post, maybe to try and shut them up about it, but it way to early to see any connection. Maybe after a year or at least Q2 2011 when we can look at what happened to p2p traffic after limewire went down. (Q4 2010 includes the month it went down of course there will be a drop, did it level out again Q1 2011?) We can then also look at music sales over the same time period and see if there is any connection in the numbers. To look at one drop in p2p and one spike in sales and say there is causation is some wild speculation. Music sales fluctuate year round will all kinds of peaks and valleys.

While I am not saying there is no way there can be a connection, I do doubt it. It is certainly too early to call though. Also to say this valley in p2p relates to this peak in music sales while ignoring the fact that p2p has been declining for 4 years and music sales have not been rising over the same time period is a bit silly.

Re: Re: People were still using Limewire?

@Transbot - yeah but that sure made diags a lot easier.
Whats wrong?
Its slow
Do you use limewire?
Yes
Then you have a virus

@scarr
Some of the news reports about the NPD data are claiming that limewire was as much as 1/2 of the p2p traffic in the US. Obviously anyone who is technically apt moved on to better means a long time ago but there are certainly millions of people who only know how to use their browser(barely) and limewire.

Limewire

Its sad that peer to peer isn't what it was in the Napster era. I took Joel Whitburn's big pop songs from 1955 until around 1999 and just went alphabetically, taking what I liked. Everything that had ever been put on a cd was there. Even stuff from creaky old LPs and even singles were shared in those days. Napster was a renaissance for old, even forgotten songs. I got everything I ever wanted except a few things that no one bothered to turn into mp3s. Today you can find most rare stuff on Youtube and make a sound recording though quality varies. Far more music is available from websites where you simply download anonymously named files. There are around 30 english speaking file-sharing information email lists that I know of who use sendspace and other download file platforms to share literally thousands of tunes at a time. I started to see this six years ago. Some of these tunes may have begun as torrents. When Napster was threatened way back though, sharing peer to peer with its magnificently broad collection of pop and rare music, began to decline. Many people were afraid they'd wind up in court with the RIAA. The four or five years of Napster was a great moment in musical history. Many recordings are in the public domain and one should be able to acquire them at no risk. I never found adequate, serious, rare classical music in those days though I wasn't looking hard for it at the time. Its a shame some variation of file sharing wasn't preserved by government sanction. We're all the poorer for it, now that the music renaissance moment has passed.

Re: Re: Re: People were still using Limewire?

Weird where are all the the hatorade drinking ACs? They have been asking for this post, I assumed they would be all over it, posting evidence about why the correlation exists and making logical and concise arguments about why there is causation.

Or at least calling people idiots and telling us we are wrong even if they never explain why, other than we are stupid.

Re: Re: Boing

I love this kind of view and analysis, noting that there is a spectrum of possibilities, but you're still missing a key point I feel...

"with each shutdown and the community around each service fragments, does a certain percentage of that services users stop downloading?"

users who stop downloading != users who start buying.

"if 50% of napster's users "went legit", and with each subsequent shutdown, another 50% of the remaining users from each resulting service also stopped file sharing..."

If 50% of napster users never downloaded another song on another service, it does NOT imply that those people ever *bought* another album. The low-cost of using napster meant that more people downloaded music they would have never bought otherwise. That's the whole point.

So I love the desire to know what portion of users stopped downloading, but you're still implicitly equating stopping downloading with starting buying. In reality, I think that's probably ANOTHER percentage.